The aerospace and defence industries in Canada are complicated, to say the least. Yet there have been major changes for some of these companies in recent years. Bombardier (TSX: BBD.B), for one, has shifted to a focus on jet aircrafts. CAE (TSX: CAE) remains focused on training and development solutions. This is for aircrafts, certainly, but also through healthcare.
So, with one more diverse, and the other more focused, which is the better buy on the TSX today?
Looking at earnings
First off, let’s look at how CAE stock and BBD stock have both performed recently. For BBD stock, the company reported their third quarter most recently, with a net loss of US$13 million, compared to a net loss of US$161 million the year before. This shows that the company is working towards profitability. Revenue also increased 22% to US$1.7 billion, with continued demand for their business jets. For now, the stock remains focused on reducing debt and improving cash flow. Meanwhile, CAE stock was a fair bit stronger.
CAE stock reported its fourth-quarter results, which exceeded analyst estimates. Net income came to US$120 million, up from US$87 million the year before. Revenue was up 10%, hitting US$986 million as well. This occurred from growth across all its business segments.
Management differentiations
One key I like to take into account when considering which stock to buy is also management. Think about it as the leader of a country. You want someone who has shown to be there during tough times as well as good times and responsible when necessary.
In this case, both companies have their own strengths. BBD stock saw Eric Martel come into the chief executive officer (CEO) role in 2020. He has been credited with turning the company around. His focus on a streamlined operation, reducing debt and improving profitability have already been seen. And that looks likely to continue.
Meanwhile, CAE stock’s Marc Parent has been CEO since 2009. He came along, as you can see, right during the Great Recession. So, he really has been there through thick and thin. Parent is well-respected in the industry and has overseen a period of significant growth and expansion for CAE stock.
Future outlook
Now for the future of both of these companies. Again, both are quite different. It seems that one will likely continue business as usual. However, the other will need to continue making significant strides to achieve profitability.
The latter, of course, will be Bombardier stock. The future looks uncertain in this post-pandemic world, with perhaps falling demand for business jets. The company is still in the process of turning around, and its success will depend on its ability to continue to execute this plan. The business jet market is actually expected to grow over the next few years. So, this could be strong for BBD stock.
CAE stock is a bit more positive. It is an established company with a diverse range of successful businesses. It has a strong track record of growth and benefits from the recovery of commercial aviation and growing demand for pilot training. It could also be seen to latch on to the artificial intelligence wave.
Bottom line
Overall, CAE stock looks like it’s the more stable and profitable of the two companies at the moment. It also holds a brighter near-term outlook. BBD stock should not be ignored, given that it’s turning around and could see high growth in the long term. However, CAE stock simply provides a stable growth model for investors to consider.
